IFS
THE INSTITUTE FOR FISCAL STUDIES
7 Ridgmount Street, London WC1E 7AE
020 7291 4800, mailbox@ifs.org.uk, www.ifs.org.uk
For immediate release,
20 December 2005
Contact: Robert Chote, Carl
Emmerson or Christine
Frayne on 020 7291 4800
IFS analysis of today’s public finance figures
Today the Office for National Statistics and HM Treasury published
Public Sector Finances November 2005. We now have details of central
government receipts, central government spending, public sector net
investment, borrowing and debt for the first eight months of financial year
2005–06.
IFS public finance
E•S •R •C
ECONOMIC
bulletins are generously
& SOCI AL
supported by the
RESEARCH
COUN CIL
Economic and Social
Research Council.
The analysis is based on IFS calculations
and does not reflect the views of the
ESRC.
Headline Comparisons
•
Central government current receipts in November were 4.1% higher than in the same month last year.
This month’s Pre-Budget Report forecast for 2005–06 implies an increase over last year’s levels of 7.6% for
the year as a whole and of 7.8% for the period from November 2005 to March 2006. The latest figures show
an increase over last year’s levels of 7.0% for the year to date.
•
Central government current spending in November was 6.4% higher than in the same month last year.
This month’s Pre-Budget Report forecast for 2005–06 implies an increase over last year’s levels of 5.5% for
the year as a whole and of 6.1% for the period from November 2005 to March 2006. The latest figures show
an increase over last year’s levels of 5.2% for the year to date.
•
Public sector net investment in November was £0.6bn higher (31.3%) than in the same month last year.
This month’s Pre-Budget Report forecast for 2005–06 implies an increase of 31.6% for the year as a whole
and an increase of 36.9% for the period from November 2005 to March 2006. The latest figures show an
increase over last year’s levels of 24.9% for the year to date.
Christine Frayne, a senior research economist at the IFS said:
“Coming less than three weeks after the Pre-Budget Report, today’s figures should not come as much surprise to the
Chancellor. Receipts in November came in less quickly than he has predicted for the remaining five months of this
financial year, while current spending is broadly in line. This is in part due to weak growth in receipts of income and
capital gains tax. As a result the current budget needs to show more improvement over the next four months to meet
the Pre-Budget Report forecast of £10.6bn, but there are good reasons to expect that January 2006 will be an
especially strong month for the Treasury.
So far this year, the current budget deficit is running 22% lower than last year. The Chancellor predicted in the PreBudget Report over the year as a whole it will have shrunk by 45%, implying that he will need a cumulative current
budget surplus of £8.7bn over the last four months of this year compared to £5.4bn in the same period last year, and a
deficit of £¼bn over the same period in the previous year.
Part, but not all, of this improvement should come from the £1.1bn tax increase on oil companies that was announced
in the last Budget and is expected to increase receipts over the next four months.”
Further Analysis
We should be cautious in inferring or extrapolating likely outcomes over the financial year as a whole from
information on only the first eight months. Bearing this in mind, the figures for receipts and spending in November
2005 show:
Central government current receipts
Receipts of Income Tax, Capital Gains Tax and National Insurance Contributions for November were 3.2% higher
than in the same month last year. This month’s Pre-Budget Report forecast implies that the receipts from these taxes
will be 7.4% up on last year’s levels over the whole year, and 5.4% up over the period from November 2005 to
March 2006. The receipts for these taxes during the first eight months of 2005–06 were 8.4% higher than those for
the same months in 2004–05.
Cash receipts of VAT in November were 1.4% lower than in the same month last year. This month’s Pre-Budget
Report forecast implies that these receipts will be 1.9% up on last year’s levels over the whole year, and 4.3% up
over the period from November 2005 to March 2006. During the first eight months of 2005–06 these receipts were
the same as those for the same months in 2004–05.
Corporation tax receipts for November 2005 were 21.5% higher than in the same month last year, although due the
pattern of these receipts over the year, November is not usually a significant month. This month’s Pre-Budget Report
forecast implies that these receipts will be 21.8% up on last year’s levels over the whole year, and 31.0% up over the
period from November 2005 to March 2006. During the first eight months of 2005–06 these receipts were 18.4%
higher than those for the same months in 2004–05.
Central government current spending
Expenditure on net social benefits was 6.8% higher in November 2005 than in November 2004. This month’s PreBudget Report forecast implies that this spending will be 5.1% up on last year’s levels over the whole year, and 7.5%
up over the period from November 2005 to March 2006. During the first eight months of 2005–06 this spending was
3.8% higher than in the same months in 2004–05.
Spending on debt interest (which is relatively small as a share of spending overall) was £2.4bn in November 2005
compared to £2.2bn in November 2004.
Other current spending by central government, including spending on the delivery of public services, was 5.9%
higher in November 2005 than in November 2004. This month’s Pre-Budget Report forecast implies that this
spending will be 5.5% up on last year’s levels over the whole year, and 5.9% up over the period from November
2005 to March 2006. During the first eight months of 2005–06 this spending was 5.3% higher than in the same
months in 2004–05.
In November 2005, public sector net investment was £2.4bn compared to £1.8bn in the same month in 2004. So far
in 2005–06, a total amount of £12.1bn has been spent on public sector net investment, compared to the £9.7bn that
had been spent by the same point in 2004–05. This month’s Pre-Budget Report predicted that net investment in
2005–06 would be £26.3bn, which is 31.6% above last year’s level.
Further information and contacts
For further information on today’s public finance release please contact: Robert Chote, Carl Emmerson or Christine
Frayne on 020 7291 4800, or email rchote@ifs.org.uk or cemmerson@ifs.org.uk or cfrayne@ifs.org.uk.
The IFS Green Budget, which will again be in collaboration with Morgan Stanley, will be on Wednesday 25th
January 2006. For more details please email bbrimstone@ifs.org.uk
Relevant links:
This, and previous editions of this press release, can be downloaded from http://www.ifs.org.uk/press/pub_fin.shtml
Useful links and background information on the Pre-Budget Report can be found at
http://www.ifs.org.uk/budgets/pbr2005/index.php
Office for National Statistics & HM Treasury, Public Sector Finances, November 2005:
http://www.statistics.gov.uk/pdfdir/psf1205.pdf
HM Treasury, Pre-Budget Report 2005:
http://www.hm-treasury.gov.uk/pre_budget_report/prebud_pbr05/prebud_pbr05_index.cfm
HM Treasury, Public Finance Statistics Index:
http://www.hm-treasury.gov.uk/economic_data_and_tools/pubfinance/data_pubfinance_index.cfm
ENDS
Notes to editors:
1.
Central government current spending includes depreciation.
2.
Where possible we compare figures on an accruals basis with the HM Treasury forecast.